10 Reasons why Advertising and Conversions are hard

David Ogilvy, the head of the famous Ogilvy & Mather advertising agency, wrote in his 1963 book Confessions of an Advertising Man (pp. 86-87): "As Lord Leverhulme (and John Wanamaker after him) complained, `Half the money I spend on advertising is wasted, and the trouble is I don't know which half."

Most platforms, give you a lot of control over how much you spend, but that does not mean they will be effective.

I used to work for a company that was very good at SEO. They were in an industry that was competing for the mesothelioma cancer keyword. At the time in 2010 it was going for about $450 a click. If you had a successful case, it was worth millions to everyone involved.

For some businesses getting somebody to sign up for a free newsletter is a conversion. If you are trying to sell a physical product, it means selling your product is a conversion. How many ads did somebody have to click on for you to sell a single unit? And how much does that cost?

Say you have a five-dollar per-unit budget for advertising. If each click cost you $.50 you have to sell your product in less than 10 clicks. This means that your conversion rate would have to be 10%. Most conversion rates are somewhere closer to one percent for an ad that gets clicked on.

If you are in a relatively crowded category, promoting your listing on either eBay or Amazon can be a way to make more sales. People have already decided to buy something when they are looking on those platforms, so you have a more receptive audience.

I found that promoting my listing on Amazon through their advertising system would work for a little while: my return on ad spend would be greater than one. Then I would get to the point where my return on ad spend was one to one or less. I eventually realized that I was manufacturing and selling twice as many products to make the same amount of money. I needed to invest in more inventory upfront, and it was additional work to keep up with the ads and make sure that they were still working.

Your total potential advertising budget will be a maximum of about 40% of your retail price. This means that on a $20 product, you could spend up to eight dollars per unit on advertising and not lose money. Keep in that if you spend six dollars on advertising, you will only net two dollars. So, to make the same amount of money, you'll need to sell four times as many units during your advertising campaign.

If you were selling an item for $100, you could probably spend $20-$30 per conversion and still make money. As long as your item is not in a crowded category, this could work.

Some can give you discounts. Many platforms (Facebook/Meta, Google, Amazon) have in-house people that will help you buy ads on their platforms.

I looked into this, but did not follow through.

If your product is a hit and you are selling millions an ad can help you sell 10 million then it is worthwhile. If you are selling hundreds advertising can be difficult.

Even in a relatively small run magazine, a single page can cost $20,000 per issue. Getting a feature article in a regional lifestyle magazine can cost about $20,000 as well.

Affiliates are great for digital products where fulfillment cost are essentially zero. You could give an affiliate an 80% cut or 90% cut, but still make money yourself. However, with a physical product you can't scale this way.

This is part of the reason why you see people selling $1000 real estate/investing courses. The actual cost of delivery is probably well under $100. They spend most of the rest of that $900 on marketing.

People who write blogs need to write about something new every day. If your product is in their niche, you might be able to get them to write about it by providing it. In 2024 YouTube videos are an obvious way to go. If you have a particular product for an audience, like a particular gaming mouse pad or woodworking tool, you could potentially get it in front of many viewers by picking an influencer or journalist to work with. In 2009-2010 this was very effective for me. The Internet has changed and is probably at least 1000 times the size that it was 15 years ago.